SEBI Updates Rules for Review, Appeal, and Waiver of Penalties by MIIs [Read Circular]

The Securities and Exchange Board of India (SEBI) issued Circular No. SEBI/HO/MRD/POD/III/CIR/P/2025/112 dated August 5, 2025, updating how requests for review, appeal, or waiver of penalty will be handled by Market Infrastructure Institutions (MIIs).

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MIIs include Stock Exchanges, Clearing Corporations, and Depositories. These institutions can take regulatory actions like imposing penalties when market participants do not follow the rules.

Earlier, the Member Committee of an MII was responsible for considering any request for review, appeal, or waiver of a penalty, regardless of who took the original action. That meant even if the Member Committee itself imposed the penalty, it would also decide whether to change or cancel it.

SEBI has now changed this process to make it more balanced.

According to the new circular:

• If a penalty is imposed by the Internal Committee of the Member Committee or based on the MII’s pre approved policy on regulatory action, any request for review, appeal, or waiver of that penalty will still be placed before the Member Committee for its consideration.

• But if the penalty is imposed directly by the Member Committee, any such request will no longer go back to them. Instead, it will be handled by a separate mechanism set up by the Governing Board of the MII.

This new mechanism must include Public Interest Directors and or Independent External Professionals who are not part of the Member Committee. The Governing Board must also issue a Standard Operating Procedure to explain how such cases will be reviewed or decided.

If the concerned member or participant is not satisfied with the result, they can approach the appropriate authority as per applicable laws.

These new provisions will come into effect on the 45th day from the date of the circular, which is September 19, 2025. All MIIs must update their systems, make changes to relevant byelaws or rules if required and inform market participants including investors about the circular.

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